I agree with Rune, plus:

If we're going to discuss adding more core features before/after 1.0, then margin trading is a much bigger market than prediction markets. If you want to find out how little Bitcoiners care about prediction markets, head over to predictious.com - its volume is tiny.

Centralized Exchange?  Come on.  Not a fair comparison at all.  Predictious is subject to major counterparty and theft risk.  After experiences with Bitstamp and Empty Goxx, no one is trusting them with their money. 

Additional I'm not sure why we would be chasing old mature markets like margin trading, which is already highly standardized and doesn't beg for change.  Prediction markets fields are currently underdeveloped, easier to implement ("I think"), and has tons more upside.  Thus there are tremendous early mover advantages. 

I've written here why Bitshares delegated selection is optimal for a prediction market.  My basis is that it empowers coordination within a crowd/community in order to make effective decisions .  Please critique if you think this is not of value proposition to Bitshares.

https://bitsharestalk.org/index.php?topic=13865.msg180595#msg180595

http://www.alexa.com/siteinfo/bitshares.org

Now South Korea is No.1 

I'm skeptical of this.  There are no China users?  They should be #2, if not #1.  Possibly they are vpning through Korea. 

I thought piggybacking off of Bitcoins hashrate network effects would have been more profitable for us because:

a) Bitcoin is the largest Market and therefore is the most liquid.  With other alt-coins we have to deal with liquidity costs.  Sharing with the Bitcoin network would greatly improve our liquidity as well. 

b) According to laws of perfect competition-- miners seeking a higher return would come to our pool as we are offering a risk free percentage back that they can't achieve anywhere else.  As a result mining off of bitcoins network would provide the largest pool of investors directed towards Bitshares.  The more miners that come, the more marketed awareness that is captured for Bitshares.  Therefore the more capital (in the form of collateral and bitassets) would be kept within the Bitshares system. 

How is mining alt-coins going to benefit us?

(start of lsmr in current develop: https://github.com/BitShares/bitshares/blob/6d42fcab803983ec16f9ec094a71fa2078febad3/libraries/blockchain/include/bts/blockchain/lsmr_record.hpp

we can also copy the working lsmr impelmentation from TC's repo)

Right on.  Glad you have an eye on this.  We may see a test version in march to play around with that can be applied to Bitshares.   

I thought some more and I'm thinking we'll have to worry a bit about additional interesting things that happen if, instead of having a bunch of agents doing one-shot deals with the market maker, we have a bunch of standing orders that will execute whenever the price (tries to) move past a given value.

Suppose there's a buy order for A at $0.40.  The market maker's current price for A is $0.41 and current price for B is $0.45.  Someone places a buy order for a large quantity of B at $0.50.  Buying B will push up the price of B and push down the price of A, but once the price of A hits $0.40, the order for A starts to execute, putting a downward pressure on B which will fight the upward pressure from the buy order.

In other words, the buy order for A creates a floor at $0.40 below which the value of A cannot fall until the order is totally filled.  Once the price hits this floor, it becomes harder for the guy buying B to raise the price (less price movement per quantity bought).

We can classify the assets as reactive, active or inactive based on the price of the top-of-book order relative to the market maker's price.  Inactive order isn't matched by the market maker (buying more cheaply than the market maker's offering).  Active order is matched by the market maker with nonzero quantity (i.e. buying strictly greater than the market maker's current price).  Reactive order is exactly matched by market maker's price, it "executes at zero quantity" which means in practice it doesn't execute.  But when an active order executes, every reactive order will execute and oppose the price forces exerted by the active order on themselves and the active order (but will push in the same direction as the active order on inactive prices!)

I'm trying to figure out how we end up implementing this without needing numerical integration.  It might be possible; I'll have to think about it some more.  OTOH maybe numerical integration is fine, especially if we smooth out the discontinuities a little (e.g. instead of having the boundaries be vertical cliffs, make them instead very steep slopes 0.1% wide with smooth curve-in and curve-out, which are less "confusing" to the integrator).

Since I'm not as close to the implementation as you are I won't share the same appreciation that you just mentioned.  I tend to think this is natural function of price discovery, in this case information discovery. The random walk could be noise (which is greatest the shorter the time interval your looking at), or it could be that this rightfully prices the degrees of belief within the market. 

However, this may help. Please do look at a this modified market maker that truthcoin and augur are going to use called Practical Liquidity Sensitive Market Maker.  From what I've gathered since I started reading it today, there is a fee charged (say 3%), which is then applied to the liquidity pool.  This alpha helps to limit the swings in the markets.  The impact of loss is reduced and a bookie won't think hard about what the appropriate seed capital should be when authoring the contract.

http://forum.truthcoin.info/index.php/topic,130.msg886.html#msg886

http://www.eecs.harvard.edu/cs286r/courses/fall12/papers/OPRS10.pdf

http://www.bayesianinvestor.com/blog/index.php/2010/06/21/an-improved-automated-market-maker/


btw since your pivoting to prediction mrkets don't be afraid to start jumping into the truthcoin forums and start picking everyone's brains there. Paul is always helpful when answering questions. 

Quote from: graffenwalder on February 06, 2015, 10:41:47 pm

Not saying it's right or wrong. But it's still gambling (betting on an outcome)

However if a third party where to launch a unibet like site running on BTS with sportsbets etc..
It could be huge.

Side question:
How would the judges be elected/trusted?

Life is a gamble.
The financial markets are a form of betting on which way the value of a product or service will move. Many of its most successful products used to be illegal due to misguided labeling of them as "gambling".  We want to develop the prediction market as a legitimate information fusion mechanism right there beside our pegged asset and polling/petition/voting services.

We should avoid associating gambling terms with it.

As for selection of judges...

The person who defines and registers the question to be posed also defines the judges to be used (up to 110 of them).  They don't have to be delegates, but they do have to be registered accounts whose "feeds" the blockchain will then recognize.  Presumably people willing to be judges will emerge over time and build reputations akin to professional referees. 

Obviously, if you want your poll question to be taken seriously by your target participants, you will choose judges with good reputations.  You will want to make sure they agree to serve as judges of the final outcome and arrange for their compensation, if any.

Presumably the voting records of those who have served as judges will become matters of public record, and those with the best records will be the most sought after for important questions.

Stan,

Like to hear your thoughts.  In your mind, does having publicly known judges increase the risk of collusion, since it is then convenient for them to contact each other?  I'm coming from the experience before us with mark karples of mt gox who built up trust in the community only to mishandle funds it when he had adequate marketshare.  That was not a small sum either, to the tune of $600mm.  We know everything about mark but he still got away with losing everyone's money.  It has yet to be seen that transparency has held mark accountable.  Can we trust a bitshares prediction market with $2mm let alone $600mm?  Should I have concerns about the risk of sabotage in this system that incrementally increases as the market cap in a prediction market expands?


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Are you saying that delegate voting should instead change to each independent proposal voting?   Or the Bitshares user interface should be expanded so that delegate's proposals are shown and with great detail?

Quote from: Ander on February 04, 2015, 07:35:59 pm

Quote from: bytemaster on February 04, 2015, 07:26:16 pm

I think a super majority of a slate of judges would do the trick.

I agree.  How many judges would we need?

Would they be delegates, or something new?

Any set of accounts defined in advance.  Any number up to 110.

Going with a judge slate, I imagine your looking for something that is just good enough for now.  Would you be against implementing this pm using lmsr?  It was originally proposed by Robert hanson and eliminates the need for a bid ask table (the beauty is a trader won't have to wait for another person to take the other side of the trade), thus a simplifying and reducing the amount of work you have to do.  Additionally it will allow you to do non-binomial pm's of any degree.  Instead of having a yes or no question of will republicans win greater than 65 seats in the house, it instead could be phrased how many seats will republicans win in the next election. 

Take a look at the excel.

https://github.com/psztorc/Truthcoin/blob/master/docs/LogMSR_Demo.xlsx






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Just by reading this thread it makes me never want to gamble on sports without a judge.  If I lost and then found out that I could either get 10% of my original bet back or screw over the guy who beat me... I might just screw him over because I'm pissed I lost and misery loves company.  I mean talk about a lot of risk in getting a payout... a lot more risk than trusting a judge to make the call.  Couldn't we have delegates providing feeds of certain events that end up dictating the winner and loser and dispersing the payout?

In any event, the trouble with prediction markets is not the judge, its the money.   

It would be trivial to allow the asset issuer to be the judge and to profit from all trades in their asset.  They would have financial incentive to be honest and reliable. 

You could even limit the role of the judge to confirming the market outcome.  Ie: the judge cannot "reverse the bet" only declare it closed.

Similarly, I have another fair question cause I may be missing something, or its my misunderstanding of how it works.  How will this produce any value to the network (eg. transaction fees) if people are just waiting on the sidelines for the next person to react.  From what I understand, since there is no time horizon or expiration date of the transaction, the two sides can wait out indefinitely.  There is no forced window of time to revolve the dispute. As a result, there will be very little transactions happening in the market because of the holdouts on both sides. This may even be a default for both sides because they can't get their money out. 
I'm of the opinion that delegates should have limited power.   

I think if you could allow asset issuers be the judge that would be valuable to the Bitshares network.  Would this be considered for 1.0 stabilized protocol Bytemaster?